Tue, Jun 15, 2004 - Page 10 News List

Investment in China surges in spite of calls for slowdown

BLOOMBERG

China reported an acceleration in foreign direct investment, suggesting government measures to slow the economy aren't prompting overseas companies to scale back their expansion plans.

Investment from abroad increased 11 percent from a year earlier to US$25.9 billion in the five months through May after rising 10 percent in the first four months of this year and 7.5 percent in the first quarter, the Beijing-based Ministry of Commerce said on its Web site. Contracted investment, a sign of future investment, jumped 50 percent to US$57 billion.

China's growing demand for cars, computers and cellphones is attracting investment even as the government aims to slow economic growth to 7 percent this year from a seven-year high of 9.1 percent last year.

"China has problems other countries would want to have -- its economy is growing too fast," said Thomas Gerhardt, head of global emerging-markets equities at DWS Investment GmbH. Western companies "will continue to invest money in China."

Volkswagen, the biggest foreign carmaker in China, said it will open three more factories in China, as part of a 60 billion yuan (US$7.2 billion) plan to double production there by 2008. General Motors said it plans to spend US$3 billion with its partners in China in the next three years to more than double production.

This expansion is being welcomed by China even as the government says excessive expansion in industries including autos, cement and steel is to blame for power cuts, transport bottlenecks and accelerating inflation.

China's producer prices rose 5.7 percent last month after gaining 5 percent in April, the Beijing-based National Bureau of Statistics said on its Web site.

ProMOS Technologies Inc (茂德科技), Taiwan's second-largest memory-chip maker, last month announced plans to build a US$900 million chip plant in China. The plant will begin production by the second half of 2006, ProMOS said.

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